Important stuff in this ‘straight talk’ interview. Buckets of ‘breaking’ stuff to unpack.

First, per Trade Adviser Peter Navarro, the Steel and Aluminum tariffs will be announced tomorrow. Second, Mexico and Canada will be given an exemption from those tariffs while NAFTA is being renegotiated. WATCH:

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The exemption will give U.S. Trade Representative Robert Lighthizer increased leverage in his efforts to close the NAFTA loophole. Closing the NAFTA “fatal flaw” is the essential “Option 1” that we have discussed previously several times. It would be against the interests of Canada and Mexico to ever agree to close the loophole. However, the steel and aluminum tariffs add a bit of financial incentive not previously in the equation.

It is still highly doubtful the amount of money in the steel and aluminum tariff aspect is close to enough to get Canada and Mexico to agree to close the backdoor loophole. However, any amount is more than was there before…. so the possibility of “option 1” increases a smidge.

THE LOOPHOLE – NAFTA’s FATAL FLAW: Why deal with the U.S. when you can just deal with Mexico, and use NAFTA rules to ship your product directly into the U.S. market?

This exploitative approach, a backdoor to the U.S. market, was the primary reason for massive foreign investment in Canada and Mexico; it was also the primary reason why candidate Donald Trump, now President Donald Trump, wanted to shut down that loophole and renegotiate NAFTA.

This loophole was the primary reason for U.S. manufacturers to relocate operations to Mexico. Corporations within the U.S. Auto-Sector could enhance profits by building in Mexico or Canada using parts imported from Asia/China. The labor factor was not as big a part of the overall cost consideration as cheaper parts and imported raw materials.

If you understand the reason why U.S. companies benefited from those moves, you can begin to understand if the U.S. was going to remain inside NAFTA President Trump would have remained engaged in TPP.

As soon as President Trump withdrew from TPP the problem with the Canada and Mexico loophole grew. All corporations from TPP nations would now have an option to exploit the same NAFTA loophole.

Why ship directly to the U.S., or manufacturer inside the U.S., when you could just assemble in Mexico and Canada and use NAFTA to bring your products to the ultimate goal, the massive U.S. market?

From the POTUS Trump position, NAFTA always came down to two options:

Option #1 – renegotiate the NAFTA trade agreement to eliminate the loopholes. That would require Canada and Mexico to agree to very specific rules put into the agreement by the U.S. that would remove the ability of third-party nations to exploit the current trade loophole. Essentially the U.S. rules would be structured around removing any profit motive with regard to building in Canada or Mexico and shipping into the U.S.

Canada and Mexico would have to agree to those rules; the goal of the rules would be to stop third-party nations from exploiting NAFTA. The problem in this option is the exploitation of NAFTA currently benefits Canada and Mexico. It is against their interests to remove it. Knowing it was against their interests President Trump never thought it was likely Canada or Mexico would ever agree. But he was willing to explore and find out.

Option #2 – Exit NAFTA. And subsequently deal with Canada and Mexico individually with structured trade agreements about their imports. Canada and Mexico could do as they please, but each U.S. bi-lateral trade agreement would be written with language removing the aforementioned cost-benefit-analysis to third-party countries (same as in option #1.)

All nuanced trade-sector issues put aside, the larger issue is always how third-party nations will seek to gain access to the U.S. market through Canada and Mexico. [It is the NAFTA exploitation loophole which has severely damaged the U.S. manufacturing base.]

Additionally, with Canada now joining TPP it has become impossible for the U.S. to remain in NAFTA and simultaneously conduct trade negotiations with TPP nations.

EXAMPLE: If the U.S. remained in NAFTA all TPP nations would engage in trade discussion knowing there was a Canadian and/or Mexican option to gain access to the U.S. market. Therefore, despite the size of our market, we could never negotiate a better trade agreement than the deal existing between Canada, Mexico and their TPP partner nations.

President Trump, Commerce Secretary Wilbur Ross, White House Trade Adviser Peter Navarro and U.S. Trade Representative Robert Lighthizer well understand this structural problem. ONLY Trump, Ross, Mnuchin and Lighthizer are willing to confront this problem. If Trump had lost the election, Clinton would have joined the multinationals and U.S. workers would have suffered greatly.

Tthe issue of Canada and Mexico making trade agreements with other nations (especially China), while brokering/leveraging their NAFTA position with the U.S. as a strategic part of those agreements, is a serious issue that cannot adequately be resolved while the U.S. remains connected to NAFTA.

At the conclusion of Round #6, this was the direct issue at the heart of a very frustrated U.S.T.R. Lighthizer’s strongly worded response to Canada:

[…] In another proposal, Canada reserved the right to treat the United States and Mexico even worse than other countries if they enter into future agreements. Those other countries may, in fact, even include China, if there is an agreement between China and [Canada]. This proposal, I think if the United States had made it, would be dubbed a “poison pill.” We did not make it, though. Obviously, this is unacceptable to us, and my guess is it is to the Mexican side also. (read full remarks)

Lastly, don’t forget we still have two big trade options that can easily replace any trade issues with Canada and Mexico. ♦First, the U.K. is exiting the European Union. Brexit provides an opportunity for team Trump to negotiate both enhanced exports and replacement imports. Second, Trump has favorably positioned a very strong U.S. relationship with India (PM Modi), and T-Rex has expanded the Indo-Pacific region to complement diplomatic interests with MAGAnomics.

We could drop half our favorable trade deals with Canada and Mexico and easily make them up with new trade deals with the U.K. and India. This reality is part of the dynamic POTUS Trump has been positioning as a counter-weight to an economic and geopolitical confrontation with China. All of those trade seeds have the potential to deliver a replacement harvest.

Manufactured goods such as cars are assembled from subasseblies like engines, headlights, which are themselves manufactured by assembling smaller parts and raw materials such as steel. If the exemption allowed low tariffs for the raw steele stock, it would encourage the middlemen parts manufactures to relocate into NAFTA countries rather than import value added subassemblies from China.

Canada imposed 150-230% tariffs against US-made gypsum wallboard prior to the softwood lumber tariffs. News media in Canada and the U.S. ? Crickets. Their priority is to bash Trump. If Trump grabbed a child that was going to be run over by a car, the Headline would be “Trump Assaults Baby” with pictures of the bruises.

Go anywhere in Canada. The dominant source of steel is China- it is everywhere. Including products “made in Canada” (welded, fabricated, and machined) then sent to the U.S. market tariff-free because of NAFTA. Canadian politicians should be supporting their own steel mills, but they don’t. Too much Chinese bribe money, the same money that the Clintons took via their fake Canadian charity with their West Vancouver bagman.

I grew with tariffs and Made In USA was the gift every country wanted. What we get is poor quality or like China getting used steel and remelting it and sending it back at a huge tariff and all the while not great steel. Think the Bay Bridge in CA that I won’t ever use again as constantly under fixing this and that and more money wasted thanks to moonbeam and democrats in the legislature. The Founding Fathers has also set tariffs. Tariffs are to help our businesses be on the same level with other countries and not demoted to where our tariffs are gifts enabling other countries to laugh at us. Sorry, the tariffs will still sell our great well made products because so many other countries want and need them, especially China as I studied there and they love our luxury items like you wouldn’t believe.

Just used my dad’s 1978 Crafstman wrench. Looks almost brand new. Would cave someone’s head in if you hit them with it. Compare it to the junk today that rattles apart after six months and ask yourself which is the proper course of action. No brainer. Yeah, it costs a tad more but you get what you pay for.

Just used my grandmother’s Mix Master from lawdy-knows-when with fond memories of the good old days (pre-WWII, for sure) when purchases were “investments” that lasted more than one generation.

First, the American Thinker piece made me ask why a professional reporter would be on the golf course, at a casino or enjoying a home massage machine with someone he was covering for his newspaper. As a former reporter, I would not cross into such personal space for a story on economics.

Second, refer to the trade/tariffs lesson by VonMisesJr in the comments section. While I don’t condone nor understand his calling Flaherty a racist, I do understand the numbers. Trump selects personnel from what they can bring to the table and how well they complete the task at hand. I trust the president’s selection of this man to bring about fair trade agreements.

Craftsman, like most well-respected American-made brand names, long ago was off-shored. Lots and lots of tools in smaller packages comes to our shores in “Made in China” crates, then removed from the crates at the retail store so the country of origin is hidden or very difficult to find. I have a guaranteed rule of thumb- if the retailer cannot tell you the country of origin, then it is made in China- the only country that needs to hide it’s name.

…Craftsman = Sears…I think Sears is the epitome of the democrats destructive agenda…until the 70’s Sears was a powerhouse with craftsman, kenmore, die-hard batteries, catalog orders & profit-sharing…every department had a manager & an assistant manager – it wasn’t a job, it was a career for regular people – with good benefits…then came affirmative action & quotas and overnight every black female (2 quotas – black & female) was moved into management (many of the black females were very nice people – just young & inexperienced)…the white experienced males left – as they now had no future for advancement at quota Sears…during the next 10 years profit sharing ended, department management ended and was replaced with central cashiers…next 10 years catalog ended…next 10 years massive debt & selloff of sears tower and now owned by K-mart…and currently, stores are closing and they sold off their iconic craftsman, kenmore & diehard trademarks…like all things liberal democrat – they destroy or bankrupt everything they touch within 50 years!!!

NAFTA should be gone or change in the rules of origin + Third country trade deal.
I would like to see the rules of origin by assess 25% tariff on all materials originate outside of NAFTA. If products are made organically 100% from US, Mexico and Canada tariff free. If 10% materials from outside NAFTA then 10% of the product with 25% tariff. Pick your own tariff level.
Second, to prevent back door access to NAFTA countries, All trade deals with third countries must be agreed and applied across all 3 countries. Any tariff or condition of import will be exactly the same as import into US, Canada, or Mexico. There is no advantage of import into 1 country and ship cross over to another. Example, US have 50% tariff on China product but Mexico has 5%. China would ship to Mexico pays 5% tariff and even then pay 25% tariff to ship in the US still 20% less than direct ship to US. All NAFTA countries should have the uniform tariff on any product from any country.

I saw this interview and I’m looking at Navarro for every twitch of his brow.
Meanwhile, I have Trump voice running in my head, “I know them all. I know the killers. The people you won’t like. The good ones, the bad ones.”
Yeah, Navarro is a killer.
God Bless him.
I love him.

There is no greater media shill for the Deep State/Washington Mob, than Chris Wallace. People like Wallace won’t know they completely destroyed America, until his new Chinese masters walk into his studio and tell him he has been an useful idiot and take him out back in the alley.

I just read the article and it is very interesting. It does seem odd that Navarro is working with President Trump to do this. Colin Flaherty is someone I trust. Navarro must be bringing something to the table that is needed and I would think that President Trump is cautious about him. It is interesting that General Kelly demoted him. Wonder why? Navarro may end up resigning soon also.

Excellent observation! Where Conservatives can be expected to freak over a heresy, VSGPDJT sees advantages and strengths in even that very “weakness.” He gets what he needs out of the Killers he brings on board, and leverages even what we might worry about into a successful completion of a task few if any recognized in advance, indeed, even after the fact many are flummoxed.

However, convincing others that he made a sound choice and insisting on explaining their future or past role in a particular campaign is anethema to President Trump. He no more reveals their tasks than he announces Military manuevers in advance, or crows about his cleverness in achieving battlefield gains.

He trusts History to tell his story as well as we trust him to create a grand epic with a happy ending.

I recently figured out this is why there is so much turnover within the Trump administration. POTUS selects people who are the best with a very special skill. Once their job is complete, they move on and POTUS turns to someone else for the next phase of what he is trying to accomplish. Honestly, I find Trump amazing. How he can get so much done being obstructed every step of the way is phenomenal.

Mr Soros,I would not put a dimes worth of thought into this guts article,he is a newspaper writer than refers to his clients in another sentence and notice below what he says about Chinese factories.This guy has three screws loose.Pick your reading a little more carefully.

“This brings us to the great irony of the Navarro-Trump plan to save American aluminum and steel plants with tariffs: there is simply no way Navarro and his green buddies would support the construction of new steel plants and aluminum plants of any kind. Anywhere. For any number of jobs. For any reason whatsoever.

No way in hell.

Ditto for the wall.

Neither will they recognize what anyone who has been to China knows: tariffs or no tariffs, China has the best factories in the world. Maybe tariffs will help us catch up. Or make us fall farther behind.”

I’m not so much concerned about the messenger, but more about the content of the message re: Navarro has actively worked to stop development of factories etc on grounds of green enviro excuses.
Unless you can show that Navarro did no such thing, I’d have to assume Navarro is anti development at least as far as his backyard is concerned.
Either way, my original comment was about being OPTIMISTICALLY cautious. Not about accepting without criticism.

Colin Flaherty (born June 25, 1955) is a writer, talk show host and the owner of an on-line ad agency and public relations company.

Most recently his by-line appeared in Bloomberg BusinessWeek[1] after he submitted a business tip to “Today’s Tip” – a section of the publication in which readers can submit business tips.

In June 2011, he won First Place in the Washington Post Spy Novel Writer’s Contest. The contest was judged by Washington Post editor and best selling author David Ignatius, who said Flaherty’s work was his “strong favorite,” and it “advances the story and twists it in a new and interesting direction, very deftly.” [2] His winning entry was the subject of a radio show on WDEL,[3] a small radio station in Wilmington, Delaware.

“China has the best factories in the world.” What are you smoking- the air at a Chinese factory? Every factory in China is made from American ideas and American technology, granted for free (and a few million in bribes to American politicians).
Now, set the rules. No pollution controls, no labor code on wages and conditions of employment, no Social Security, free land stolen from the former owners, and electricity from coal-burning plants with Zero pollution controls and voila, the “best” factories in the world. And at the end of the day, toast your success with a glass of fresh polluted water.

FINALLY, an American President who knows the true value and strength of the American worker, industry and market–and is ready, willing and able to repair, rebuild and defend them. Alleluia–let’s get back to work, America.

@TheLastRefuge2 Mexico & Canada have been given a lifeline! Our President is testing them. If they continue to allow China & others to use NAFTA as a back door into our country to circumvent tariffs, he will walk away immediately from NAFTA. Hope these 2 countries choose wisely!

Hmmmm … maple syrup from India and tequila from the UK. Seriously. NAFTA is toast. We’re just making the imposition of the Mexico/Canada tariffs coincide with our exit, a little fart in the elevator as we get off.

I like the entire quote from President Coolidge:
There does not seem to be cause for alarm in the dual relationship of the press to the public, whereby it is on one side a purveyor of information and opinion and on the other side a purely business enterprise. Rather, it is probably that a press which maintains an intimate touch with the business currents of the nation, is likely to be more reliable than it would be if it were a stranger to these influences. After all, the chief business of the American people is business. They are profoundly concerned with producing, buying, selling, investing and prospering in the world. I am strongly of opinion that the great majority of people will always find these are moving impulses of our life.

Coolidge would never recognize what has happened to the “press”…they deem themselves an expert in everything and tell the “people” what they should think and say, and each sector of the press is trying to out do the other one. If would be laughable except they’ve taken on the “shock & rock” of the Libs & let the Libs lead them around by the nose or maybe armpit hair. As the Libs get more & more hateful and violent, likewise goes the press.

Bill Clinton sold the American worker cheap . President Trump and crew are redeeming Americas manufactoring back from China / you want to know what Rapist Bill cost America ? Just look at China before NAFTA . Look at China now ! Look at America manufactoring now but keep one thing in mind one piece of heavy equipment compared against what ?? . We lost our manufactoring base we got nothing in return this is the plan of globalist /NWO / banksters and RINOS -& Marxist . I want it all back and im willing to suffer if need be to get it back for my grandsons and great grandsons

As a Canadian, I’m hoping for the downfall of my country. Those who voted for the idiot teenager are those who will suffer the most.

I think change will come sooner than later. Soon, elections in Ontario (a guy like Trump, his name is Ford, aka the Ford Nation). Next year, elections in Canada. Polls (???) everywhere indicated a strong wave of change toward the center-right and right.

My apologies. We’re pulling out of a 30-yr. skid ourselves. Trying to get those wheels going again is not often popular, especially when the looney press doesn’t like change they don’t agree with [as if a press card is a degree in economics]. Canada is a great country and you will survive. The US is $20 trillion in debt so we have to fend for ourselves for a while.

You are correct. And to add insult to injury, recall that it was those darn Republicans who put NAFTA through Congress. And Rush Limbaugh – back then a loyal GOP supporter – gave it full-throated support for months. I always disagreed vehemently with him on that and wrote him several times. Since then he has admitted at least twice (that I heard on air) that it wasn’t a good move.

Here’s a pull from a WaPooh article (I usually refrain from quoting them but the facts do check out elsewhere too)

“Bush(41) had viewed NAFTA as a political opportunity, an achievement for his reelection campaign. He initialed the deal on Aug. 12, 1992, before the GOP convention, and then formally signed it in December 1992, after he had lost the election to Clinton.
….
So Clinton did not negotiate NAFTA, nor did he sign it. But he did put his political prestige on the line to get it approved by Congress — even as two top Democrats, House Majority Leader Richard Gephardt (Mo.) and House Majority Whip David Bonior (Mich.), opposed it. In the House, NAFTA passed 234-200; 132 Republicans and 102 Democrats voted in favor of it. The Senate approved NAFTA 61-38, with the backing of 34 Republicans and 27 Democrats.

All those damn Think Tanks that popped up under Reagan like CATO and Heritige pushed these multi-country Trade deals. Sold out Main Street to K Street to import cheap labor and turn our young men into sissies. Makes us sick. This is decades of selling us out and no one wants to buck up and admit they screwed us. That’s how the Democrats kept hold of the rust belt. It will take a while to turn this trade around, but it will be worth it.

It is not your fault. Sometimes I have entered a comment, hit “Post comment” and the screen flips but it does not post.
Then I try again and two posts are on the screen.
This ancient mother board has issues with swollen capacitors, etc. so I was just attributing it to my computer’s glitches. Or I was on the verge getting the pop up “windows virtual memory too low”
Computers…..

Have to watch that or you might get a different sort of pop-up that is more of a bang… 🙂

Those “badcaps” were also a result of Chinese IP theft, one that was slightly borked, so the electrolyte “recipe” wasn’t complete. Really caused problems (and unsolved failures) not just in PCs… Nothing like brown ooze on a mobo or “poppin’ fresh” caps to ruin your day…

(There’s an outfit that will recap your mobo for a small fee plus postage; they also sell kits of caps, if you DIY) (yep, I looove the smell of rosin-core solder in the morning)…

There is another, a yuge market, even yuger in a few years, and, judging from T-Rex’s speech yesterday at George Mason, trade is high on the list of topics, as well as transportation and infrastructure.

T-Rex is there as we speak. And our terms are much, much better than China’s terms.

Charles Payne is fantastic! Peter Navarro is getting much better with each passing interview. I love the way he handled that WAPO BS. To be honest, I would do anything to be in the WH under our President. Urinals would never look as good 😉!

Charles was referencing this about Mexico 🇲🇽:

This is the reason why PDJT will announce our withdrawal from NAFTA by the end of March! This kills our GDP. The more we import versus export is completely subtracted from our GDP Rates. I guess Mexico realizes that their days are numbered. Get as much in the USA as possible!

I agree. Payne did an excellent job interviewing Navarro and Navarro was great. Here we see what the media should be doing! Having an intelligent conversation and bringing up all facets of an issue without dragging everything down with gotcha questions, agendas, interruptions, and arguments like we see so many times, even on FOX! This was really refreshing. I had a positive view of Payne before but this just raised it.

Scott Adams on steel tariffs, trade policy, and why Trump is possibly the only person who understands it all. (except Navarro, Ross, Mnuchin, Lightizer, etc.)
Last half is a good idea for a solution to unifying the Koreas.
Worth a listen.https://www.pscp.tv/w/1BRJjroNLNWJw

The Canadian and Mexican NAFTA negotiators – and the leaders of those countries in their own Election Years – will OWN the OUTCOME, including the tariffs on Steel and Aluminum industries if they WON’T cut a deal.

You know, one would assume that any average minded human being would question the simple question of LOGIC in these matters. For instance – how can it be cost effective to make a HEAVY product (like steel), shipped thousands of miles away to it’s destination versus making the same HEAVY product and only having to ship it a few miles or a hundred miles….? The Greenies alone should be protesting about all the Pollution these ships are causing…(thousands of gallons of fossil fuels each hour burned)…There is a reason WATER (much lighter than steel), is not poured into super tankers and shipped….think about that…

“The Greenies alone should be protesting about all the Pollution these ships are causing”

I guess that is something that we should let them know about. There are a bunch of wild horses (a non-native species) running wild in the Southwest that are causing a lot of environmental havoc there. That invasive species gets a pass from them as well.

We should have grown up eating bison, a sustainable product in our plains states, rather than beef cattle. It is a little too late for that, though.

Remember how the NeoCons positioned the US Asia Pivot and their dream of Middle East conquest…it’s been one disaster after another…the NeoCons “abandoned” South America and let the narcotraffickers and Chinese move in too…President Trump and his Team of Patriots have moved us in one year from paper tiger to powerful Lion!! There are a myriad of possibilities…if not for the Fools in Congress the three seas agreement could’ve reduced the tensions with Russia and they’d be more cooperation!

Free trade is great as long as it is FAIR. A lot of talk about free trade but not much implementation of actual fair trade.

Reminds me of the banking collapse in 2008. “Free markets, free markets, free markets,,,,crash, hey we need a trillion dollar bailout.” – free markets out the window. A lot of these “free trade”, “free market” people are complete frauds when it comes down to it.

People like myself who believe in actual free markets and free trade should be the most disgusted by these frauds who have gone down this road over the last 40 years.

Fox News is a perfect example of these frauds. I don’t know if it is old fashioned greed or the system was was intentionally subverted from within but the frauds need to be rooted out.

What is more beneficial, both politically and economically — to “renegotiate” and “compromise” or get out and try to negotiate a bilateral deal? What outcome is most desirable? What outcome is most probable? Judging by what Navarro said, I think I see another round of pointless negotiations on the horizon. Canada and Mexico will have a strong incentive to drag this out as long as possible if their tariffs are forfeited while the negotiations are under way. Is Trump just taking the lumps out before cutting the cord?

Sundance, you’ve written “If Trump had lost the election, Clinton would have joined the multinationals and US workers would have suffered greatly”.

It brought to mind Secretary Wilbur Ross’ brilliant January Davos panel discussion you posted a few days ago. At the 14:30 mark, Secretary Ross pulled the Globalists into line, explaining that not just Candidate Trump, but also Candidates Hillary & Bernie intended withdrawing from the TPP – so if Hillary had become President (I shudder at the thought), America would have withdrawn from the TPP anyway.

It was a killer line, that shut up the Globalists. How could they disagree? It’s a fact.

But, you just *know* Hillary would have reneged on that campaign promise as soon as she became President, and signed the TPP. And those Globalists knew it too, but couldn’t say it!

Gosh, a President who actually follows through on campaign promises. Astonishing!

Canada is a net importer of steel and every steel mill in Canada is owned by foreign investors. Those two facts alone should be sufficient to establish a credible security risk for Canada and indirectly for the United States.

The United States is Canada’s largest source of imported steel. The United States has been Canada’s top steel source for more than 20 years. Increasing U.S. steel manufacturing by less than 7% from our output in 2017 would allow us to eliminate the need for Canadian steel. That level of production would still be 15% below our output as recently as 2000. Our leverage in this negotiation is obvious.

If we manufacture the steel, jobs increase, wages increase, our manufacturing infrastructure improves and the money stays in the United States. With modern production techniques and corresponding improvements in productivity our costs decrease. Advantage USA.

NAFTA is doomed! As such, the steel and aluminum tariffs will be applied to Canada and Mexico. And fiery furnaces of American industry will alight once more! And we won’t just come back into the market, will dominate the market! We have the iron ore. We have coal. We have coke. We have the furnaces. We have the market. And we have the American ingenuity and work ethic!

Words fail me when it comes to expressing my gratitude and admiration for our great POTUS Trump!
I hate that he is not getting any recognition by the media outside FNC/FBC and some blogs. The MSM is loathsome and their narrative is all lies.
I also hate that the Cabal/Left/Globalists et al. have surrendered our sovereignty and pushed us to the border of the cliff. I had no idea that our aluminum industry was in life support. It is insane to run a country when said country has not raw materials integral to national security and defense.
I hope and pray that the massive shift in the narrative coming soon as a result of the IG report and all the court actions to ensue, will focus on the excellent job our great POTUS is doing and that Americans can see how blessed we are to have this unique opportunity to save our beloved USA!